Over 21% of Starbucks transactions across their 23,000 stores are completed using their in-app mobile payment system.  Starbucks has not only redefined how we order and pay for coffee, it has also revolutionized in-store mobile payment.

Starbucks didn’t use Apple Pay or Google Wallet. It didn’t even bother to use existing credit card rails. Instead it did something so simple the average user doesn’t even notice it. Starbucks utilized its existing gift card system for its mobile payment platform. That’s right – when you hold up the Starbucks app in front of the scanner to easily pay for your coffee all you are doing is paying with a regular Starbucks gift card that you loaded for yourself.

As a $130 billion industry annually, the gift card is quickly becoming a standard in gifting and a convenient form of payment. While only 2% of gift cards were digital gift cards back in 2011, in 2015 it increased to 18% of gift cards. Millennials especially like the instant and flexible experience of the gift card and are no strangers to using it in-store or online. In fact, more and more are purchasing gift cards to use for themselves as a form of currency for retail shopping.

Like Starbucks, other retailers are starting to realize that they already have a robust payment system in place that can be utilized for other platforms beyond the simple gift card use case.

Using the gift card system as the back-end for retail platforms can drastically reduce the need for resources and manpower when developing the new experiences. For instance, it can eliminate the need for e-commerce or point of sale integration as the gift card is already an accepted form of currency (with zero transaction fees!) at the retailer’s checkout.

Like Starbucks, other retailers are starting to realize that they already have a robust payment system in place that can be utilized for other platforms beyond the simple gift card use case.

What are some other use cases for a closed loop gift card system? Here are a few examples:

Gift Registry:

A state of the art gift registry platform is a very sophisticated consumer facing solution that typically requires integration and ongoing maintenance in conjunction with a number of internal departments such as merchandise, store operations and IT.  However, by using a retailer’s existing gift card system as the backend of the gift registry, any gift purchased off of a registry is added to the registrants’ store credit. This allows them the full flexibility to redeem the gifts at their own convenience, and even change their mind about a gift and purchase anything else instead.

A great example is IKEA’s gift registry. Because it is based on a closed loop gift card system they were able to launch a robust gift registry platform within 90 days without having to integrate it with their point of sale or e-commerce site.

Group Gifting

Group gifting is simply functionality that allows users to break the ‘glass ceiling’ when it comes to gift prices. Instead of a number of smaller gifts, a group of friends or guests can chip in towards a larger item, without having to coordinate amongst each other. This functionality works well on any e-commerce purchase as well as on existing retail gift registries or wish lists that don’t offer group gifting. In fact, we’ve already spoken about how valuable group gifting can be on a registry.

Without group gifting, gifts are generally limited to the average spend of a single sender and excludes any higher price items. Using an existing gift card system can allow shoppers to chip in any amount towards a larger gift which is then sent to the recipient. The gift card is the ‘owner’ of the gift, accumulating the funds and making them available to the recipient.

Without group gifting, gifts are generally limited to the average spend of a single sender and excludes any higher price items. Using an existing gift card system can allow shoppers to chip in any amount towards a larger gift

Product Promotion

A gift card doesn’t always have to be about a gift card. It can also be a promotional tool helping to ‘nudge’ shoppers into trying a new product. When promoting a newly released product or sale, retailers can build a stored value component into their marketing campaigns that allows shopper to use a $5 gift cards towards the new item that is being advertised. Many times a little push is all it takes to get consumers over the purchase hump.

Checkout Conversion

Checkout abandonment is a huge problem in the retail world. It’s especially high when it comes to gifting – gift senders can’t complete a checkout without knowing the recipient’s exact shipping address or preferred product details such as size color and style.

Existing gift card systems can be used to allow consumers to complete a checkout for a gift after they abandon a cart.  The system can enable the shopper to complete the checkout without knowing a shipping address for the recipient. By leveraging the gift card system, retailers can offer the customer the ability to purchase the gift by applying that amount to a digital gift card without needing to know the shipping address or product details of the recipient. That way, they still feel like they are putting in the thought and care to choose a specific gift, but the retailer isn’t losing them to the details.

Whether it’s using an existing gift card system or any other system, Starbucks is an example of how being creative with systems that are already in place can leapfrog a retailer to the forefront of customer experience and technology.